Board connections and M&A transactions |
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Authors: | Ye Cai Merih Sevilir |
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Institution: | a Leavey School of Business, Santa Clara University, Santa Clara, CA 95053, United States b Kelley School of Business, Indiana University, Bloomington, IN 47405, United States |
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Abstract: | We examine M&A transactions between firms with current board connections and find that acquirers obtain higher announcement returns in transactions with a first-degree connection where the acquirer and the target share a common director. Acquirer returns are also higher in transactions with a second-degree connection where one acquirer director and one target director serve on the same third board. Our results suggest that first-degree connections benefit acquirers with lower takeover premiums while second-degree connections benefit acquirers with greater value creation. Overall, we provide new evidence that board connectedness plays important roles in corporate investments and leads to greater value creation. |
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Keywords: | G34 |
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